Lakes Blue Energy’s PEP 169 Sale Finalised, Future Production Royalties Present Risk and Reward
Lakes Blue Energy has completed the sale of its 49% stake in PEP 169, receiving $6.5 million and securing a 4% royalty on future production. The company now shifts focus to advancing drilling at its Wombat and Trifon/Gangell fields in the Gippsland Basin.
- Final $3.5m payment received, completing $6.5m sale of 49% interest in PEP 169
- Lakes to earn approximately 4% royalty on future petroleum production from PEP 169
- Sale proceeds to fund drilling of Wombat-5 well in PRL 2, Gippsland Basin
- Liability for pre-existing royalty transferred to new owner Armour Energy
- Contingent Resources of 719 billion cubic feet certified in Wombat and Trifon/Gangell fields
Completion of PEP 169 Sale
Lakes Blue Energy has announced the receipt of the final $3.5 million payment from the sale of its 49% interest in Petroleum Exploration Permit 169 (PEP 169) to Armour Energy (Victoria) Pty Ltd. This payment completes the $6.5 million transaction, which was finalized on 9 October 2024 after all preconditions were met by early October.
The sale marks a significant milestone for Lakes, allowing the company to monetise a non-core asset while retaining exposure to future upside through a royalty arrangement. Under the terms of the deal, Lakes will receive ongoing royalties of approximately 4% of the wellhead value of any petroleum produced from PEP 169, aligning with the royalty framework established by the Victorian Petroleum Act 1998.
Strategic Focus Shifts to Gippsland Basin
With the sale proceeds now in hand, Lakes is directing its capital and operational focus towards advancing development at its 100% owned Wombat and Trifon/Gangell fields within PRL 2, located in the prolific Gippsland Basin. These fields boast independently certified Contingent Resources of 719 billion cubic feet of gas, underscoring their potential to materially contribute to the company’s growth trajectory.
The company is actively progressing plans for the drilling of the Wombat-5 well, including negotiations with drilling rig operators and responding to regulatory requests from the Victorian State Government regarding the operation plan submitted last year. This next phase of exploration and development is critical for Lakes to unlock value from its core assets.
Financial and Operational Implications
Lakes’ Chairperson, Roland Sleeman, highlighted the strategic benefits of the transaction, noting that the royalty arrangement provides meaningful upside without exposing the company to further exploration, development, or production costs associated with PEP 169. The transfer of liability for the pre-existing royalty to Armour Energy further streamlines Lakes’ financial obligations.
The injection of $6.5 million in cash strengthens Lakes’ balance sheet and provides essential funding to support its drilling program and broader development activities. Investors will be watching closely as the company advances its drilling plans and regulatory approvals, which will be pivotal in determining the timing and scale of production ramp-up.
Looking Ahead
While the royalty income from PEP 169 offers a steady potential revenue stream, the real growth catalyst lies in the successful execution of the Wombat-5 drilling campaign and subsequent development of the Gippsland Basin assets. The market will be keen to see how quickly Lakes can translate its contingent resources into producing reserves and cash flow.
Bottom Line?
Lakes Blue Energy’s completed sale and royalty deal sets the stage for a pivotal drilling campaign that could redefine its growth outlook.
Questions in the middle?
- What is the expected timeline for drilling and production from the Wombat-5 well?
- How material could the 4% royalty from PEP 169 become if production scales up significantly?
- What are the regulatory hurdles remaining for Lakes’ Gippsland Basin development plans?
